European Markets Trim Gains, Wall Street Slips

"The consensus forecast for a second-half recovery depends a lot on a boost from trade but the data is not validating this call," said Steven Ricchiuto, chief economist at Mizuho Securities.

In Europe, shares in Fiat rose 4.9 percent after the Italian automaker closed a deal that gives it most of Chrysler's assets and saves the troubled U.S. automaker from liquidation. A new company will be placed in the hands of Fiat's CEO Sergio Marchionne.

Elsewhere, a sharp increase in car production helped Britain's industrial sector to grow in April. The country's industrial production rose by 0.3 percent between March and April, official figures showed.

"This came as something of a surprise to analysts — being the first rise seen since February 2008," said Anthony Grech, market strategist at IG Index. "Hopefully this will provide more concrete evidence that a corner has been turned."

Stock markets have rallied over the last three months, and as equities usually start rising 6 to 9 months before actual recovery emerges in the official economic data, this suggests investors believe the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.